A Royalty Model For Value Creation With Zymeworks' Kenneth Galbraith

On this week's episode of the Business of Biotech, we're speaking with Kenneth Galbraith, CEO and Board Chair at Zymeworks, a biotech developing multispecific therapies internally and through partnerships with companies including Jazz Pharmaceuticals and BeOne Medicines (formerly BeiGene), J&J, Merck, Daiichi Sankyo, and GSK. Ken talks about Zymeworks' shift to a royalty model for development funding and value creation, lessons learned from platform deals and cross-border R&D, the benefits of strong royalty agreements and backloaded milestone payments over headline upfronts, and industry dynamics for the coming year. Ken also shares insights from his deep experiences as a biotech investor and corporate director, and explains why scientific primacy should always drive biotech business decisions.         

Access this and hundreds of episodes of the Business of Biotech videocast under the Business of Biotech tab at lifescienceleader.com.

Subscribe to our monthly Business of Biotech newsletter.

Get in touch with guest and topic suggestions: ben.comer@lifescienceleader.com

Find Ben Comer on LinkedIn: https://www.linkedin.com/in/bencomer/

Chapters

• 0:00 Meet Kenneth Galbraith And Zymeworks
• 2:20 Firsts In Biotech And Early Lessons
• 5:25 Navigating Unknowns And Cross‑Border Deals
• 9:05 Decade Timelines, Capital Cycles, Talent
• 12:05 Operator vs Investor: Boardroom Mindset
• 15:15 Building Trust With Scientific Founders
• 18:05 Time Management Across Roles
• 20:07 What Corporate Directors Actually Do
• 23:05 Zymeworks Portfolio And Partnerships
• 26:00 Open Platform Strategy And J&J
• 30:20 Deal Design: Less Upfront, More Royalty
• 34:05 Zanidatamab Partnerships With Jazz And BeOne
• 38:00 Why Shift To A Royalty‑Led Model
• 42:00 Three‑Pronged Growth: R&D, M&A, Royalties
• 46:00 Building A Royalty Acquisition Team
• 48:20 2026 Outlook: Science Drives The Cycle
• 58:24 Closing And Where To Subscribe

Transcript

Ben Comer: 0:07

Welcome back to the Business of Biotech. I'm your host, Ben Comer, Chief Editor at Life Science Leader, and today I'm speaking with Kenneth Galbraith, president, CEO, and board chair at Zymeworks, a company managing a portfolio of licensed drug candidates and developing an internal pipeline of multi-specific antibody therapeutics and ADCs. Ken is an experienced biotech leader and life sciences investor who has worked at more than 20 biotech and investment organizations. I got a little stressed out myself just looking through his CV. But that's one of the reasons I'm excited to speak with Ken today. We'll talk about some of his past experiences in biotech and investing and get his take on where the industry is headed. We'll learn about the corporate director role, uh a position that Ken has held at more than a dozen biotech and pharma companies, and we'll talk about Zymeworks, how the company attracts and manages multiple partnerships, why it shifted to a royalty model last November, and what it means for Zymeworks' pipeline and development programs. Thank you so much for being here, Ken.

Kenneth Galbraith: 1:17

Oh, thanks very much. I appreciate the invitation.

Ben Comer: 1:20

Well, I'm uh I'm happy to have you on the show. Uh, I wanted to start out with your background experience. Um, you're a biotech company leader many times over, uh, and an investor with deep experience. I think you've led your own fund. Uh, in addition to currently leading Zymeworks, you're also a part-time chair at Syncona. Uh, what are a few of your favorite professional experiences? I guess uh thinking back through your work across a bunch of life sciences companies and several investment groups.

Kenneth Galbraith: 1:54

Yeah, absolutely. Um, you know, probably it's probably not unlike other people. The first thing I did in the sector was probably the most interesting because it was so novel from myself. So I I got involved in biotech back in 1987, which doesn't seem possible because that's 38 years ago and makes me really old. Um but I was just a new business school graduate looking for something to dig into. And I and then through serendipity, I met four somewhat mad professors from the local university here in Vancouver who wanted to start Canada's first biotechnology company. Uh and they said they wanted to be Genentech of the North. And my first question was who was Genentech? No idea about the sector at all. And from the very beginning, they they were amazing scientists who had these ideas to create novel, novel biologics and novel structures uh from emerging science. They just said they didn't know anything about business, so uh they wanted me to join them and handle the business of biotech. And so that's what I did. Uh, so I joined them. It probably wasn't a great career decision at the time because we didn't have any money and it was such a new industry. And but from my standpoint, it was so early on there weren't experts in the field. We didn't have experience, there weren't paths to travel down to follow others. We we just had to find a way to build biotech at a very early stage in the sector development. And so that was doing things for the first time was pretty interesting. So I got to do the the first strategic partnership between a pharmaceutical company and a and a biotech company in oncology was something I had the chance to do. Um, where there weren't any precedents or legal agreements you could follow. You just had to, we had to figure out how biotechs and pharma companies would work together to bring products to market, which was exciting. Um, did the first biotech IPO in Canada, did the first foreign company who went on NASDAQ as a biotech. So doing you know, things first in biotech is what we're all about. And having the chance to do that on the business side was pretty exciting. And for 13 years, we built that first company, QLT, here in Vancouver, into a global company that had, you know, two approved products, one in oncology and one in ophthalmology, and really um, you know, changed the course of treatment for macro generation as the first pharmacological approach. And so, you know, biotech is about taking emerging science and trying to do something first, maybe before traditional pharmaceutical researchers have the ability to use those emerging tools to develop their own products and then finding a way to partner with them to get access to capital and other experience and commercial channels for pharmaceuticals that in those days biotechs really didn't have. So that was a tremendously rewarding experience for me. I've done things also in medtech outside of biotech, which is exciting. Uh, work with a company, Angiotec, who developed the first drug-alluding stent for coronary application, which was about trying to find how to take a little bit of paclitaxel and formulate it to stick on a bare metal stent uh and improve the outcome for people who can can have a stent. Um so doing things first and innovative and being out front, you know, got me hooked from probably the very first day on the job back in 1987. Uh, and ever since I've tried to find a way to stay in the industry in different ways and forms to use the experience I have and use, you know, what I think about as the business of biotech to really turn scientists' dreams or things that they're working on into real pharmaceutical products that get to market and get to patients.

Ben Comer: 5:24

It must have been daunting, uh in at least in some respects, coming out of business school, coming into a brand new industry that you weren't that familiar with. Uh, I wonder uh, you know, what you could say, maybe, Ken, about how you got up to speed, you know, how you figured out what it was uh that that you needed to do, particularly in some of these experiences that you've just mentioned, where uh it doesn't seem like you know you had a lot of models to look at uh in order to do these, you know, pretty complex and uh I assume, you know, pretty stressful at times uh company operations. You know, how how did you manage to kind of find your way?

Kenneth Galbraith: 6:04

Yeah, I think um I think the one thing I really enjoyed about the early time, and again, I've I've had other experiences beyond that, including Zymeworks now, which are very rewarding, but in those early days, you know, there there wasn't a pathway. Um, in my first company back in 1988, we structured the first joint venture in research between a company based in China and a company based in North America. The very first one. And I know it, you know, China is very much a rage now because I was definitely ahead of my time, but trying to work out how you know researchers in China would work with research in North America for you know their own benefit, the mutual benefit was really interesting for me. Trying to figure out how biotechs and pharma companies would work together because they're culturally so different, you know, economically, they're different targets, but trying to find a way how you can collaborate together with a large pharma company and a small, more entrepreneurial biotech was really interesting. And so sometimes those when you don't have those pathways, you get a chance to maybe define the business in a way that makes sense for you as opposed to following someone else's path. And for me, I've I've used those same principles I started with back in 1987, even today. And I think sometimes, you know, remembering that experience where you didn't have a path to travel allows you to think about ideas and strategies that maybe aren't evident because others aren't aren't doing them right now, but you think it's a great idea because it's what you saw back in the early days before there's a path. It's a part of the pivot we made recently at Zymeworks to think about how we can create a really valuable commercial company without commercializing things ourselves and focusing on not just the science, but the economic impact of that science getting to market, which is our royalty-based structure. So I think it just gives you a different um a different lens to look at the sector. It's very unique. Um, a lot of the friends and colleagues I started with back in 1987 aren't still in the industry. For some reason, I'm still here because I love it so much, I just can't give it up. Um, so I think that different lens just allows you maybe to look at things a little bit differently than than newcomers to the industry.

Ben Comer: 8:03

We're gonna uh we're gonna talk about the uh the uh royalty model that that Zymeworks is uh now currently using. Um, but I I want to ask just a couple of um uh questions first, uh just digging into your background a little bit more, Ken. One is um I'm curious, you know, what some of the biggest obstacles or or challenges uh that you've faced prior to joining Zymeworks, um, either from you know the earliest days or or across the numerous organizations that that you've worked in. Do any stick out to you as particularly difficult challenges that you had to overcome, um, you know, either from a uh company perspective or from uh an investment perspective?

Kenneth Galbraith: 8:45

Yeah, I think the most challenging thing in our industry is again the the long-term development time frames for taking an initial idea right through to commercialization. And again, it's usually a 10-year process. You can try to short circuit that where you can. But if you look at zanidatamab, it was about 10 years from original invention by this great scientist inside Zymeworks to getting our first approval at FDA. And what you realize is that over that 10-year time period, that's a long time uh in someone's career and someone's life. It's longer than most market cycles for per capital being provided. So you generally have to live through periods where capital has a low cost and where capital is not plentiful and has a high cost. And how you maneuver that when you think about talent, it's very unusual to have employees who join you at the start to make an invention and still be here when it's commercialized because they have other opportunities and careers in individual companies in biotech don't last that long. We're very fortunate that the main inventors for zanidatamab are still here in the company trying to do it again, but that's unusual. So it's like just trying to manage this idea where your business plans are driven by your development cycles, which tend to be very long, but there's things with capital and talent in the middle of that that aren't going to be that same time period. And how you manage those periods where capital's not plentiful, where it might be high higher cost, how do you do that? Um, also looking from a talent perspective. And again, from a competitive and a partnership perspective as well, 10 years is a long time to have a partner who keeps their focus in the therapeutic areas you are. From a competitive standpoint, that's a long time to be developing something and worrying about competitors coming up and creeping up on you when you didn't expect it. And so there's a lot of things to manage with that time frame in mind. And 10 years sounds like a long time frame for investors too. So I think for particularly public investors, but also private, when you're a venture capital firm, you know, a 10-year cycle seems like a long time to wait to get you know paid back for the investment you're making. So trying to find a way to ensure that investors may not stay with you for that entire time period as well. And so finding mechanisms, and obviously that's why most biotechs end up being listed, to find a way for investors to have a timeframe that's different in their investment cycle than your development cycle. So those are all things I think we try to manage in the business, but the nature of invention to clearance from a regulatory set of market is is not is not a short time period as it might be in other industries.

Ben Comer: 11:09

Yeah, right. The the funding structure, the the perennial problem that kind of uh never never goes away uh in this industry, and it's just uh a continuing ongoing challenge to kind of regardless of the of the uh company. I wonder, uh, Ken, if you could compare and contrast your work in venture capital with company leadership. And and I'm curious just about how the perspectives compare uh and differ when you're on the inside versus you know a company, uh an investment firm who's who's trying to make you know good investments.

Kenneth Galbraith: 11:44

Yeah, I think, I mean, fortunately I've had you know the ability in my career to vary some of my experience. So obviously I started out as a as a company operator and building uh helping build my first company with a set of scientific founders. Um, but I've been able to help companies from the boardroom, just an independent director, and I've had experiences where I've been on on a board or in the boardroom, but bringing a check with me. So I've been an investor director as well. Uh and in some cases I've done that, you know, in one company, AnorMED, I had the chance to do all three of those. I was on the outside as an investor, then I was a director as the chair, and then I was the CEO until the company got sold. And so, you know, I think you try to apply the same skills, but obviously you have different roles to play when you're there. I think what I've tried to do is try to take the same skills I would use to build my own company to help others build their company, realizing that you're you're not doing that work, but you can still have the same mindset and don't let that mindset change because you think you're in a board role or an investor role. You're sitting in a boardroom trying to help talented people develop new medicines and get them to market so they can help patients. And that tends to be very financially attractive for the capital providers in those ventures. So always taking that approach. So if you know, if you look inside the boardroom design works right now, you know, if you came and sat in one of our board meetings, you might find it difficult to understand who the directors are and who the management are because it's just a bunch of smart people with different skills and experiences working on the same problem. And they might have different titles and different roles, but we all have the same mission. Uh, you know, the manager works a lot more than a director will, but we try to not have those roles. I've always tried to take that approach in boardrooms when I'm working with CEOs and management to build their companies. And I think that for me, at least with our relationships, that's always tended to work well because I think they've understood I've been where they are. Uh, I'm not trying to do their role now, they've got their own role. But I just try to help them with their mission um the way I would if I was one of their management team or if I was their CEO working in the management team, exactly the same mindset and lens that we look at the business.

Ben Comer: 13:48

Right. Well, I mean, that's a cultural dynamic that that you have to establish as a leader to have people uh contribute in that way. And it makes me want to ask, you know, about you know, the the mad scientist uh that you mentioned previously, uh the dynamic between um, you know, an investor or or you know, the money guy, so to speak, and the scientist, um, you know, it it it almost seems like sometimes, and I come across uh a lot of of scientist CEOs, and many of them will say, you know, they really needed a a good business partner to move the company forward. Um, but there is not, there's there's there can be tension. I don't need to tell you this between uh one side and the other. And I I wonder, uh Ken, you know, what could you say about just the the interpersonal dynamic there and and how you, you know, maybe thinking about your previous uh examples in this role, how you foster that kind of trusting relationship with someone who has uh an incredible idea, wants to bring a uh a medicine to a patient, but may not know much or or anything uh about the business business requirements uh to get there. How do you how do you foster that kind of uh relationship with with those folks to move it forward, you know, to meet everyone's goals?

Kenneth Galbraith: 15:07

Yeah, that's a really interesting question. And and again, I I don't think I've been perfect uh all the time in dealing with these amazing PhDs and PharmDs and medics uh in in what they create. But I think you have to have I've met lots of smart investors in our industry, financially trained people, business-oriented people, which is great. But but our business is based on scientific innovation, creating novel medicines that you know have never existed before, that help patients in a way that that we you know have never happened before. Zanidatamab is changing the standard of care for people with HER2-positive gastric cancer. That's not something I will ever have a chance to do, but it's the basis for everything that comes after that. I'll never have my name on a patent, uh, I'll never be able to give a scientific presentation around something like we're gonna do this week around zanidatamab in in San Francisco. So I just won't have that chance. But I think you need to have a key understanding that you can be smart and take lots of great financial strategies or partnering strategies that are helpful, but without the basis of that scientific innovator creating something that can turn into a new medicine, you don't have anything. That is the forefront of our sector. And I think as long as you're willing to admit that uh and have that scientist understand that, that they're the focal point for creating value in the biotech companies that we have. And that will never change. And and therefore, I think once you have that respect, then I think you can find ways to make their scientific innovation more valuable or get them more capital if they need to, or change the business or shorten the time frame to get to market, which is helpful for everyone. So you can find ways and strategies to to develop their science, but without that very piece, that very innate piece of innovation that I will never be able to do in my role in a biotech, is just it's amazing to watch. Um, but it has to be the basis of everything that you do. You know, we're we're a very valuable public company right now in Zymeworks, but that's because of the scientific innovation that's been going on in our labs for multiple years, you know, more than a decade, um, of scientists just creating something brand new that no one else ever thought of. And that's amazing. But it is the basis of everything that comes after that. And so I think you have to have that understanding. You have to admit that understanding. And I think as long as you do that, I think you you can really build great relationships with the scientists and medics and PharmDs and drug development professionals after that that are working in their technical area to move, you know, a new, you know, a novel innovation into a new medicine that can get the patients. And so I think it takes that type of self-awareness as somebody on the business side. Uh admit that piece of it. Um, and then I think that relationship tends to go very well.

Ben Comer: 17:52

That's excellent. Um, you have uh several jobs right now, Ken. I mentioned your part-time role at Syncona in the intro. You're also a director, I think, at Zomp, a multicolor 3D spatial cytometry uh service provider to the biotech industry, uh, in addition to your leadership roles at Zymeworks. What can you say uh about time management and how you handle all of your various responsibilities?

Kenneth Galbraith: 18:21

Yeah, I seem to manage it. I think, you know, in our business, what you find is there's so many interesting things you can get involved with, you know, around the globe in different ways. Uh, it's hard to say no because um if you're addicted to the innovative nature of our business, you know, it tends to be something you don't want to give up and you want to do as much as you can. You know, I probably have uh, you know, just about the right amount of activities going on to be able to manage it effectively and probably less than others might have. I think when I was running a venture capital fund, I think I was on 14 different boards and had 20 investments to manage. That was much harder. Um, you know, it was they were very common and similar. This is a nice approach. I you know, I have a full-time day job, which is my main priority here at Zymeworks as the chair and CEO that I've been doing for for four years, which is great. I have a small part-time role with Syncona, which is a really innovative UK-based venture capital group that's been very successful in areas of cell therapy and gene therapy. And I I learned so much about their early, early company formation and how they just gravitate to quality science uh in Europe. And Zomp, I love because when we think about science, we always think about biology and chemistry and physics is right out there. And it's very interesting how we can use innovations in physics and math uh to really help in drug development as well. And so Zomp, I love because it's something that came out of the physics department at the University of Cambridge with some really smart people who've come up with an approach that could be really helpful to understanding drug discovery and drug development in a way that that couldn't exist without their technology. And so I love to explore, you know, the physics side, the third science, the unforgotten, you know, the forgotten science in our we usually think about biology. Chemistry, and that's really interesting to me. And you see most of that in medical devices, our tools, and and how they can be utilized.

Ben Comer: 20:07

You've been a corporate director uh at more than 15 companies, uh including Zymeworks from 2009 to 2013, I believe. Um, for the listeners of the business of biotech, could you describe the primary function of the corporate director and maybe what you like about that role?

Kenneth Galbraith: 20:28

Yeah, I mean, there's really two, I see two separate roles, and for me, they're they're both equally important. Um, one is a director, you obviously have a fiduciary duty that you're there representing investors or shareholders who can't be present in the boardroom uh on a regular basis. So you are the interface between investors' capital and management teams who are operating the business. And so that's a very important fiduciary duty that you need to take seriously uh in the boardroom. And so I think there are some certain statutory reasons why you're there, but it's mostly a fiduciary relationship to look out for shareholders' interests in the boardroom. And that's really important. You know, the second thing you get to do is you can, because you're in the boardroom, have access to the business that way, you can find ways to improve that business. You can find ways to help the company build a different strategy, a better strategy, a better company. And that's a tremendous value add. I think both of those roles are important. And I think whenever I've been in a boardroom, I've tried to make sure I can exercise both of those uh in the right way so that you're still sitting between management and shareholders and respect that that's an important linkage. But at the same time, helping build helping management build a better company benefits shareholders in the same way as providing oversight of a CEO or serving on an audit committee. So doing both of those roles in the right dimensions and in the right way, I think are extremely important. I've always found opportunities where I can exercise both of those at the same time. And that's really fulfilling to see the company do well, see the management appreciate the advice you might give them, and shareholders appreciate what you've done to optimize the value for them of the of that business investment that they made.

Ben Comer: 22:05

So you're working as a kind of go-between, you know, you're you're working with the management team on behalf of the the shareholders, but you're you're also can going back to the the investment group and you know maybe explaining you know what the management is up to or providing updates to them. Are you um who what what person on the management team are you working typically most close with uh as a corporate director? Is it the CFO? Is it the the chief operating officer? Is it the CEO?

Kenneth Galbraith: 22:35

Yeah, I think for me, um, just because of the experience that I've had throughout my career, working with the CEO is really um the most important thing for for me. Uh I do tend to work again with the whole management team at some degree, but you know, trying to find a way to work with the CEO who's making you know these multitude of decisions throughout the day, whether it's talent, capital, RD decisions, partner decisions in a way that I've done before, uh, I think has been really effective. I mean, being a CEO of a biotech is a little bit of a lonely business sometimes because you don't have peers within the company. And so one of the roles I think, you know, directors who have this type of experience or they set on a board can apply to is really to be the sounding board for the CEO. Yes, they can have an executive coach. Yes, they can have a trusted management team member that they work with. Um, but finding someone who's been in their shoes in similar situations uh who can be that sounding board for them as a peer-to-peer is really important. And I think I found when I've had those relationships with CEOs, we tend to be more successful with the companies. And I think just having the ability for them to be able to reach out to you in that way, of someone who knows the company because you're inside of it, because you're on the board or you're invested in it, is just different than having a coach or an outside mentor or or another member of management. So I found those are really attractive. And again, those take work to understand each other, to make sure you can you can comment freely about what's going on. I think they appreciate the openness and transparency. Realizing you're not the CEO, you're not running the company, you're just trying to help that CEO be the best CEO they can for that company. And so trying to facilitate them to get to their optimum performance is really something that I've always tried to focus on. I'm not there to change them, I'm not trying to make decisions for them. Just trying to get the most out of them. And I think when you can find those situations, those companies tend to perform better over time.

Ben Comer: 24:29

Uh let's talk about Zymeworks and your um your business model. Uh, you and correct me if I'm wrong on this count. I think you've got two internal clinical uh candidates, several in preclinical development, and five partnerships that span more than a dozen candidates. Uh is that correct? Is that sound about right to you?

Kenneth Galbraith: 24:49

Yeah, that sounds that sounds pretty close. Yeah. Okay.

Ben Comer: 24:52

Um well, maybe we can start with your your partner strategy. Um, how have you been able to engage so many partners? I think you've got five ongoing partnerships right now, or or I correct me if I'm wrong on any of this, Ken, but I I think you've got five partners. But what would you say about your your partner strategy playbook? How have you been able to uh to bring these these partnerships into the company?

Kenneth Galbraith: 25:16

Yeah, it's really a part, I mean it's a part of our history and our in our own DNA. I mean, I I think when the company was started, the the original company was based around a computational platform for designing complex biologics in a unique way. Um, you would call that AI today, but back in 2007 when I started working with them, we didn't really talk about AI, but it was really a way to try to explore these complex biologics and get ahead with the design. Um, and so when we had this platform, we developed it ourselves. You know, one of the first things we wanted to do was to find out how how good was it? Um, was it effective? Was it not? So we had this idea that we would share that platform with a multitude of pharmaceutical companies in multi-product collaborations and let them who who had products uh available and ideas available to really use it to design complex biologics uh within their R&D unit. Uh and through that process, we kind of understood about the strength of how important this platform, which is called asymmetric, was. And so through those partnerships, we we really validated how important that was to design biologics. And then we turned to using that for developing our own portfolio, which started with zanidatamab, which is you know an amazing, you know, potential multi-billion dollar peak sales opportunity for us just getting to market now. It's amazing. But it was designed with the same Azymetric platform that others have utilized. So, because of our way of how we wanted to validate the platform, we ended up with all of these different partnerships, which uh brought in capital, but still, some of these products have now moved into clinical studies, and we have royalty and milestone interests. So we have a financial interest in the success of those programs. And now that developing, those have become very attractive potential cash flows for us. Uh, I think if you look at this year in our financials, we've received a pretty substantial series of milestone payments from partners who are still utilizing and developing products made under the Azymetric platform. The most advanced is by Johnson Johnson, which is a really unique T-cell engager called pasritamig for prostate cancer, which moved very quickly from phase one data being presented earlier this year into multiple phase three trials. And that's really interesting. For us, you know, years ago we started working with Johnson Johnson. It was just a way to validate our own platform so we could understand what utility it would have for us. But now these become really important uh financial factors for us in terms of the feature cash flows they provide in terms of royalties and milestones. So we were pretty heavily had a pretty heavy series of partnerships early on. So we we like this partnership model. Um, we're able to get value back without having to put all the capital in ourselves or take all of the capital risk or all the development risk. So we're willing to share that risk. You do share the return uh as well with partners. So I think in 2022, when I took over with Sharon CEO, it was only natural for us to take zanidatamab, which is an amazing HER2 bispecific antibody, um, which we had rights to outside of Asia Pacific and partner with Jazz Pharmaceuticals and really turn that also into something where we could share the risk and capital to continue development with Jazz Pharmaceuticals in exchange for a pretty large upfront payment, uh, but also a series of royalties and milestones based on the success of zanidatamab and the market. And that's become a very attractive financial proposition for us, in addition to being an amazing invention and now what's going to be the standard of care and HER2-positive gastric cancer based on our phase three data. So I think we we think this partnering model turns out to be a pretty good thing about the business of biotech, the investment model around that where you're able to use capital from others, but still add value to your underlying share of the financial interest is pretty interesting. So we we like that idea. So now, because of all these partners we've done, we look more like a royalty portfolio than maybe a biotech sometimes in terms of the value. So I think when you look at what biotech companies need to do first, they need to be successful with something that's a really interesting new medicine. I think we've done that. Then you have to figure out what you do next. Uh, and that's where we've you know started to talk a little bit more about the strategy of how do we compound the success of inventing one amazing new medicine, which is going to be a blockbuster, and and what do you do next to try and utilize that success to continue to build the company?

Ben Comer: 29:35

There are a lot uh and yeah, the the I think the benefits to this model are are clear. Um, there are a lot of companies out there who would absolutely love to partner with JJ to validate their their technology. Um uh but you know, not everyone gets a chance to do that. Is there is there anything that you could say, Kenneth, kind of about and you know, at Zymeworks or or beyond Zymeworks about how you kind of get in front of a company like J&J or or like Jazz or like GSK uh and and you know get them into that initial partnership to to maybe validate a technology. I mean, you you mentioned some of the benefits, you don't have to build out, you know, all of the capabilities internally, you know, manufacturing and regulatory professionals, uh everything that comes along with moving into late-stage clinical trials through the regulatory process and then into commercialization, all you know, not inexpensive uh uh or or not very very expensive uh endeavors uh as a company to build up those capabilities. Whereas if you can partner as as uh Zymeworks has and validate the technology, it sounds like it almost snowballs from that point where you've had some success with one partner, other partners become interested. Um, but is there anything that you could say just about, you know, from the the perspective of a company that has, you know, what what it considers to be an incredible invention or platform or idea that would, you know, love the opportunity to work with you know a blue chip pharma company to to validate that and have all of the support that I would imagine comes with a partnership like that. You know, how how do you how do you make that initial partnership deal?

Kenneth Galbraith: 31:22

Yeah, that I mean that that was really the story of of Zymeworks. I think we made a few important decisions after that strategically. But I think back in 2007 when we we felt we had something that was a very interesting platform, uh it's at a time frame where bi-specific and multi-cific antibody development was really was really progressing around that 2007 timeframe, but we were still having trouble designing them. The you know, the original T cell, you know, bi-civic T cell engager from Micromet, which was the first one that was uh approved, was really still pretty primitive in terms of taking two antibodies and putting them together with a linker. And and really, you know, it was an amazing MGen bought Micromet for a billion dollars. There's products have been successful out of that technology platform, but it's still pretty primitive. And so trying to bring a better understanding of how you design something and make a leap from being a monoclonal antibody or a single antibody to something that was multi-specific or bi-specific, to something we thought asymmetric would do well at. And and we decided early on we couldn't really do it ourselves because we didn't have targets and things to work on. We weren't a fully fledged biotech at that kind. We were really more of a computational platform. So we we did what we would do. We used an existing relationship that we had with Merck uh and begged them for a project where we could take something on to design something using our platform. Uh, we didn't do it exclusively with them. We said if you let us do something, we'll work on it, we'll bring it back to you and show you what we've done. Uh, and we want the ability to be able to show others that same work. Uh so they gave us a project that they hadn't been successful at on side Merck. I don't think they had any expectation this small company in Vancouver they'd never heard of would be successful. Uh, but when we did the work and gave it back to them, they realized you know how impressive this platform was and that really validated our own thoughts. And we worked on multiple programs for Merck. But we made a really important decision at that point that instead of working exclusively with one company, uh, we would we would really make it open source. So, you know, our first relationship with Merck was really relationship driven because of knowing them from prior prior situations in the sector. And then we took that, uh, what we'd done for them and were able to use that really to market our platform on an open source basis to anyone who would want to work on it. And we just gave them exclusively exclusivity around the targets that they might want to work on. But we were able to craft deals after that with GSK, Lily, Daiichi Senko, JJ. Uh, in and we also structure them as really some upfront money to get access to the platform, but really we would we would take the risk and try to take uh a bigger financial interest if the products were successful, which I think was really a great way to market the platform that way. And so we were able to structure a whole host of arrangements that were all multi-product uh focused. As I said, J and J's Paz Rita Mig is in phase three now. There are a number of other of those that are in phase one studies, and we would hope they'd be successful to move forward. But that that's again not our decision because they're not our our products. But taking this approach of taking an open access and making it available to as many partners as you possibly could was a different strategy and thinking about just working with Merc exclusively and and really being their engineering, protein engineering design company. And so I think that led that to happen. But we always had this idea that the platform was so great to work with pharmaceutical companies' products. Why don't we use it to make our own innovative products, which is what we did. And that's where zanidatamab came from. It's where some of our other programs moving forward have come from that same platform. So we made decisions about, you know, first using the open access platform to validate the approach for it and really to get, you know, capital from those arrangements, realizing that we would want to do our own proprietary portfolio later on. And now we're a mix of those things. We've got zanidatamab in the market, we've got other products in our R&D portfolio based on Azymetric. Uh, we developed other platforms which you can utilize as well alongside Asymmetric. And we still have a whole host of products being worked on by partners where we have a financial stake if they're if and when they're successful, which we hope we hope Pes Rita Mig will be, and we hope there's others that are still there. So the the history of how the company developed its technology in the original platforms, thought about its own products versus partner products, kind of led us to where we are today, but definitely more of a partnered model because of the original way we we decided to apply the platform, then maybe other biotechs might start uh their life.

Ben Comer: 35:46

Yeah. Yeah. And you know, leveraging existing relationships, absolutely. Um, I liked what you said though, too, about kind of pushing the milestone payments maybe later into development, even and I don't know exactly what you know your your various agreements are, but do you do you think that that is a uh a kind of useful strategy for biotechs, you know, going into partnering meetings? Because it shows, I guess, confidence in in the platform, in the technology to say, you know, we're we're gonna take this into whatever phase two, phase three, regulatory approval, you know, before we're due, you know, this larger chunk of uh of a payment. Uh am I am I reading that right? Is that is that what you're saying?

Kenneth Galbraith: 36:30

Yeah, I think I think the you know the philosophy, at least I've always had about the business of biotech, and I think it might be different than you know how Wall Street investors might look at a company. I think when they see a partnership between a biotech and a pharmaceutical company, that the upfront payment is everything, right? So how much was the upfront payment? Yeah, right. Double digit million, triple digit, what was it? I mean, that that tends to be the headline. You know, we tend to focus a little bit more on looking at the value of that product once it gets commercialized and the revenues it can generate, and wanted to make sure you get a fair share of the success. It doesn't have to be upfront. It can be later, it can be later on. And sometimes when you make those arrangements, it's a lot easier to negotiate terms that get you a higher degree of success later when it's not evident you'll have the success. And I think, you know, I think um, you know, as long as you believe in what you're doing with the technology of the product and you're happy to share the risk of development along the way, um, that can be a very attractive financial model. I think if you look at our partnership with Jazz that we formed in 2022, where we take zanidatamab just into phase three studies for biliary tract cancer and gastric cancer, um, you know, we were able to negotiate uh a healthy upfront payment of $375 million, which I think was our entire market cap at the time, which I think was a headline. But underneath that, if you look at the royalties and milestones that we negotiated out of that arrangement with jazz, in 2022, those would not maybe have seen to be as much value because we were several years on the market and it wasn't evident whether it was going to be peak sales of a billion or multi-billion dollars. But but we clearly thought if this is successful, we want to keep our fair share of that and we're happy to share the risk uh to get to that point. And I think if you look at where you know the risk we shared in getting zanidatamab approved initially for biliary tract cancer in 2024, you know, the big Phase 3 readout that we had on zanidatamab from the gastric cancer studies we just completed, you know, we were as interested in that data as anyone because we were carrying the risk that if that study worked, that was going to be financially very rewarding for us based on the partnership that we have with Jazz and our Asia Pacific partner, BeOne. So I think if you're willing to take the risk, and in biotech, we're always taking risk on innovation, competitive risk, you know, the odds of something getting to market are very slim. So you're you're always in the risk business. You might as well get paid well if you stay in the risk business and the risks turn in your favor, which in this case it did. So we've always had this approach of looking at the totality of what the commercial value of something might be and making sure you get your share of that, even if you have to wait some time period, even if you're at risk for some of those payments. It's something that that is more attractive, maybe, than the headline of what the upfront payment is for a particular partnership. I think in areas where we've done that, those have tended to work out very favorably. Uh, and we've done that multiple times in how we structure partnerships with companies. Um and I think they've tended more often than not to work in our favor and be more financially attractive than maybe otherwise. And and sometimes when you get to the point where risk is reduced and success is there, uh, I think the partner on the other side realizes they probably shouldn't have agreed to pay you so much for that's but at the time it wasn't clear it was going to be successful, so maybe they didn't work as concerned about it. So I think our financial stake in zanidatamab is is great for us and our investors. I think our stake in pasritamig, who used Azymetric platform or J&J using our Azymetric platform to make pasritamig is really attractive for us uh without having to put the capital in to do the development. Or build a commercialization force. And so the return on invested capital for our investor standpoint can be really attractive without us having to transform and be a commercial entity, which is always the goal of many biotech startups. You can find, I think, partnership models and financial models that bring in as great a return on invested capital without having to take risk on transforming yourself from a science-based company to being a commercial company. That there are those who have done it. It's very attractive. It's a long road. There's many who fail. Those who make it seems great, but there are ways to still get a great return without having to have your own Salesforce involved in the utilization of a new medicine.

Ben Comer: 40:42

Zanidatamab, you've mentioned uh the FDA approved last uh November as Ziihera? What's the correct way to say that one?

Kenneth Galbraith: 40:50

Uh I call Ziihera.

Ben Comer: 40:51

Ziihera.

Kenneth Galbraith: 40:52

But I I still call it ZW25, which is the original laboratory name given to it.

Ben Comer: 40:57

Well, it's uh yeah, it's still in the clinic for a number of additional uh indications. So uh zanidatamab is uh, you know, it still makes sense. Uh it was approved by uh the accelerated pathway uh last November 2024, uh developed uh at Zymeworks, commercialized by Jazz and uh and BeOne in certain markets, formerly BeiGene, now BeOne. Um is there anything more that you could say, Ken, about how that partnership specifically with Jazz and BeOne came about? Was it a good fit with their portfolio of products? How did you engage them or did they engage you uh initially? Anything else you could say about how that that deal came together? They're now commercial, uh I should say Jazz is now commercializing uh Zahira uh in in the US and and and elsewhere, or just the US?

Kenneth Galbraith: 41:48

Uh yeah, so Jazz uh has uh marketing for Ziihera of Accelerated Approval based in the U.S. for biliary tract cancer. In Europe, we also have a conditional approval, which is you know similar to approval, which is market and BeOne is marketing Ziihera in China uh well. So we're we're you know we got three continents covered uh so far with the two partners. I mean, they developed at different times for different reasons. I think back in 2017, we were very interested in looking at the applications zanidatamab uh in areas outside of metastatic breast cancer, including biliary tract cancer and gastric cancer, where we thought you know innovations had been made previously 10 or 12 years ago by Genentech with Herceptin and Perjeta. But we could even improve the standard of care, you know, beyond what we saw with those with those therapeutic indications. Uh but you know, gastric cancer is a very large uh prevalence in Asia-Pacific markets. So we specifically were looking for a partner who had uh operations in China to really get access to clinical study patients and the ability to study the drug in those indications in China as a part of a global, global development program. And so that's hard. Although I have some experience in China back from 1988, it is hard to go into China and do your own clinical studies. You really need a partner to do that. And so we looked around for a partner who had a good RD operation within China and BeOne or Beijing at the time, um, was attracted to zanidatamab. It fit their therapeutic areas. It was something that was really interesting for them to consider. And they came on board as our Asia Pacific partner, except for Japan, but primarily it was to really get access to clinical trial patients in China, which is hard to do yourself. And that allowed us to really develop much more quickly with zanidatamab to get to the point where we where we are now. And they're also, you know, they were a great emerging, you know, large biotech, I might say. And right now they they look pretty much like a small pharma company now with the global operations and commercial footprint that they have. And so happy to have them. But that started in 2017, you know, outside of Asia Pacific, we were able to do the development on our own and didn't really need a partner to develop it. We had capital at that time, uh, because fortunately Wall Street was in a Wall Street was in an upcycle back in those times in 2018 through 2021. So we had capital from investors to continue development without a partner at that time. And that allowed us to get into two phase three studies on our own uh without having a commercial partner inside Asia Pacific. And obviously, that increased the value of the of the opportunity uh before we got to partner. I think, you know, we probably thought a little bit about um whether we should commercialize ourselves or not around that time frame. But if you look at the potential for zanidatamab, even beyond biliary tract and gastric cancer, especially metastatic breast cancer and and other HER2-expressed tumors, that's a very large opportunity that probably is too big uh for a biotech to undertake. And so we made the decision that it would be better for us to bring in a partner to provide the capital to finish development and commercialize alongside B1 rather than doing it ourselves. Uh and I think if you look at the return on invested capital decision of doing that, that's a pretty positive um uh return that we had without having to have uh our own commercialization group that we start and fund ourselves. And so that that's the decision point that we had at that time frame. So both of those partnerships came for different reasons that were important to the business at the time. And fortunately, we were able to form those partnerships at the time that we needed to in the course of the development of the drug. That's not always the case. Um, but there was a great alignment between those partners coming on board at the right time to make sure development went forward. And I think we picked two really great partners that are a great fit for commercializing zanidatamab. And we're looking forward to their success um commercializing that with patients globally. Uh, and that's what drives the value back to us as the financial interest we have in the in the product still.

Ben Comer: 45:51

I I want to I want to ask a couple of questions about uh the shift to a royalty model. Um, did the approval of um zanidatamab, uh the the accelerated approval in the US, conditional approval uh in Europe, and it's it's marketed in China too. It's approved in China as well by the SFN S S FDA. Um did that catalyze the shift to the royalty business model? Um I I think you know that was at least announced this past November. Um and maybe uh after you answer that, Ken, maybe you could just, you know, give a kind of high-level explanation of the royalty model for uh for listeners who aren't as familiar with it.

Kenneth Galbraith: 46:34

Yeah, sure. So I think definitely getting the initial approval for zanidatamab back in 2024 started us thinking about, you know, how you know what do we do next? Um, you know, the real trigger for talking about that publicly was the the outcome of the Horizon GA1 study that was announced in in November is gonna be the full data that's gonna be presented in in San Francisco this week before JP Morgan uh at the ASCO GI Cancer Conference. Um, and again, it it's really around the strategic question for biotechs, which is you know, your first step is to create a unique differentiated medicine that's gonna help patients tremendously. And zanidatamab is certainly that. It's really, you know, it's the only HER2 bispecific antibody that's on the market or anywhere close for helping patients and HER2 expressing tumors. It's an amazing invention that no one else has been able to duplicate, and that's great. And we think, you know, with biliary tract cancer and gastric cancer, you know, it's gonna be a multi-billion dollar opportunity. And if we can find uh, you know, clinical data that supports its use in medicine like breast cancer or other tumors, it's gonna be well beyond that. And so that's always your first step is create something amazing. And then you have to ask yourself, well, how do I compound that success? What do I do? And for most biotechs, it's simple answer. You go, well, let's do that again. So take the same people, the same platforms, the same strategy, and try and do it, do that all over again. Uh, sometimes it's not so easy. So you can look at companies who have done that once. Um, you know, Genmab's a good example, who, you know, created a great, a great antibody, partnered with JJ. And then, you know, it took them, you know, more than a decade to find something that was interesting. And even then, they decided to go outside to find or find it through acquisition. So when you're trying to compound this success to build on the value you already have in the company for your investors, you just need to think about what's the right way to do that. And, you know, we're certainly in the lab using some of the capital from zanidatamab to try and do it again. And the fact we've got the same researchers who invented zanidatamab doing it again. You know, we're trying to do it in a different way. We've, you know, we've moved on the antibody side to try specific antibodies. We moved away from bispecific because we think you know, going to a more complex biologic might be more different and more innovative and get you something that bispecific doesn't. So we're we did change the context of that. We've gone outside of oncology to look at autoimmune and inflammatory diseases as an area. So we even in the RD piece, we're trying to do it differently. And also in the last 10 years, we you know, we developed um through acquisition and further development an antibody drug conjugate portfolio as well. So we've gone really to a different area than we've started with with zanidatamab. So the internal RD, and what we're trying to combo the success with is investing in things that are just the next level. It's not the same thing, it's it's different, and maybe that'll be successful. Um, but also there's a way you can compound the success of the partnering aspect of what we did. So we have some really great partnerships, which are very valuable, not just on zanidatamab with Jazz and BeOne, but with J&J and others. And if there's a way to try to compound that success, because you think we were very effective at finding partners, striking really good arrangements, holding those financial interests through risks like a phase three readout, uh, till they get much more valuable and appreciated in value. So the idea is can you compound that again? So we we started to think about, you know, not every great RD idea we have has to come from our labs. It can come from outside. So we talked about being more strategic with acquisitions of products outside that might we might add to RD portfolio. And so we've taken the step to do that. At the same time, we can also compound the success we have in the more what we call passive assets. So we have these streams of royalties and milestones where we're not providing the capital to drive things forward. Partners are doing those. We're not decision makers, but we benefited from the decisions and success they have. If we could do that again, over and over again, maybe applying some of the capital back to that part of the business could also find a way to drive more value for shareholders than the simple aspect of, well, let's try to repeat our prior success. And so we're taking an approach which is really threefold. We're investing in our own RD, but it's it's quite different than maybe what we did before because times are different. We're looking at strategic acquisition of other assets we could add inside the company. So we didn't invent it, but doesn't mean we can't develop them. And at the same time, we're using capital to try and acquire additional products that we didn't invent and we didn't partner, but maybe we can acquire and add to our royalty portfolio and compound the success of the royalties we've created through the prior partnering we've done. So it gives us a multitude of opportunities to allocate capital to three different types of businesses that might be the way to compound our success from zanidatamab in ways that are you know maybe not as straightforward to explain to investors, but might have a higher probability and maybe a lower risk uh uh related to trying to compound the success to another success. So in biotech, that that's usually what it's all about. You gotta do something great. Uh I think we've done that with zanidatamab. Uh pasritamig looks pretty great as well in Phase 3 studies. Um, but beyond that, you've got to find a way to be long-term successful. Sometimes that's becoming a commercial entity, as others have done. That's not our choice. Sometimes it's just you know doing the same thing you did over again. But sometimes it's finding skill sets you learned along the way that you can apply in a different way. So trying to find a way to acquire royalties for things that we didn't invent, maybe didn't partner, but we we believe in the products and we'll hold those products from you know phase one or phase two or phase three clinical development right through to commercialization. Then we get the appreciation of value of being able to hold on to those uh that'll be commercialized by by partners. That's a really intriguing way for us to build our future life as a biotech who's done something great, got a great new medicine to market. But to build on that, we're doing it in a way that's more unique to ourselves. It fits with our history, it fits with our skills and experience. It's a slightly different model. So I think it's got some interest to investors because the risk associated with the business of biotech in that model is slightly different. It's we're not a royalty company and we're not a straight out RD biotech company. We're we're using things that are a little bit in a hybrid in the middle. We don't know where that ultimate success will be. Maybe there's another zanidatamab sitting in our R&D lab and we don't know it yet. Maybe we're able to acquire really great royalty on someone else's product that was invented and licensed to a pharma company. Maybe that becomes a blockbuster and we keep that appreciation of value. Or maybe there's another asset out there that we didn't invent, but we can certainly see the feature of it, potential of it, bring it on board and develop it with our development capabilities, and then partner it and keep the value from that. So we have multiple ways of building feature value in the company building on the strength and experience that we have. This unique design works. That's what you know, that's what that's what we're trying to do. We talked a little bit about it in November. And I think as we execute it, people will hopefully understand uh why that's interesting, why that might give you a different risk-return relationship than other biotechs. Uh, and if we can execute it properly in all three aspects of that, that could become a really important company.

Ben Comer: 53:45

Yeah, yeah. I'm running out of time with you, Ken, even though I have several more questions I'd love to ask you, but I'm gonna I'm gonna try to wrap this up more or less on time. Um, but I I did want to ask you in terms of buying royalty streams on other products, who is uh you have a you know a kind of a team of of experts who are scanning, you know, continuously scanning industry pipelines and you know making the case to you and the board of directors on you know which products you know fall into a certain you know category of you know the good, better, best? I mean, what what could you say just about how you uh and and maybe it's you know, uh I don't know if you're looking at specific therapeutic areas, what your criteria is for for potentially selecting products to buy royalty streams, but is there anything uh quickly uh that you could you could say about that process?

Kenneth Galbraith: 54:37

Yeah, I think a part of it is repurposing things we already do inside the company. Like in our lab, we look through 100 projects to decide which one we think is really interesting. On the royalty acquisition side, we're building those skills. So you'll see you've seen and you'll continue to see recent changes in management, uh, recent changes in the board to bring in some skill sets and experience of things that we haven't done yet. We haven't bought a royalty, we've created our own through partnering, you know, developing assets and partnering, but we haven't really acquired one before. Uh, we haven't acquired a product from outside and brought it inside. So those are skill sets we don't have inside the company. So we've been bringing those inside to allow us to execute the new strategy we talked about in November, while also repurposing some of the talent we have inside who might use some skills in a different way than they've used them previously inside the company.

Ben Comer: 55:21

Uh yeah, you appointed uh an acting chief investment officer, uh Scott Platshon, in November 18. Is he is he tasked with kind of working on some of the some of the royalty stream acquisition, potential royalty stream acquisitions?

Kenneth Galbraith: 55:36

Yeah, I mean he he's building a team of the types of people that you that you mentioned about you know folks who can search and evaluate for these things, know how to transact them, know how to get a good price for a great asset, um, and know how to you know handicap and and try to uh predict you know return on invested capital. So that's something he's leading in terms of building that that team for us. Got it.

Ben Comer: 55:56

Um it's a new year, 2026. Uh, given your experience uh as a leader and investor, uh Ken, I I promised in the intro that we would get your take on you know where the industry is headed. Uh maybe from a funding and and kind of ecosystem perspective, you've been around to see, you know, a couple of boom and bust uh investment cycles. You know, what are what are your uh predictions? Uh what's your outlook for for this year? You know, uh let's just keep it to this year. Where what do you think is gonna happen?

Kenneth Galbraith: 56:27

Yeah, we I mean we don't uh for 30 years, we don't pay much attention to Wall Street cycles or or other parts of our ecosystem. You know, for us, we just focus on trends and emerging science, and the rate of innovation is going up dramatically continuously. So we're gonna see lots of other great inventors like we had in San Diego Matter Labs creating new medicines from nothing, and that's amazing. Um, and our ability to really provide a lot more benefit to patients as we get these emerging science and tools is phenomenal. If you look at the standard of care that we're adding for gastric expressing gastric cancers, it's amazing what we've been able to do with these new tools, and that's going to continue to develop. And as long as that's in place, uh then I think you still have a strong underlying reason for the sector to exist. And how you partner and where you get capital from and how you do all the business of biotech is just based around having that underlying strong science. And it's not going away. It's it's getting stronger. We're better at so many different things along the way. Human biology is still complicated. We're still understanding it, but we're understanding more of it every day, and we're understanding at a faster rate. And therefore, that's just opening up opportunities for us to provide benefit to patients that we just didn't exist even three years ago or five years ago. And so that's a really strong underpinning. So the long-term outlook is extremely solid and we'll work our way through cycles of things that happen along the way.

Ben Comer: 57:51

Yeah, including various uh uncertainties uh related to the regulatory and policy environment uh, too, I'm sure. Uh Ken, it was really a pleasure speaking with you. Thanks so much for uh for taking the time to come on. Oh, you're welcome. Thanks very much, Ben. I really enjoyed the discussion with you today. Uh, we've been speaking with Kenneth Galbraith. He's president, CEO, and board chair at Zymeworks. I'm Ben Comer, and you've just listened to the Business of Biotech. Find us and subscribe anywhere you listen to podcasts, and be sure to check out our new weekly video cast of these conversations every Monday under the Business of Biotech tab at life science leader.com. We'll see you next week, and thanks as always for listening.